If I hear it one time a week I hear it ten times (well maybe an overstatement there) but anyway I hear it weekly. And if you work in the business development/economic development field of helping small business owners and future owners then you do to. There is simply no way around it - you are going to hear it. What is it you ask? The statements "No bank is willing to lend to me." or "I can't find anyone willing to give me the money."

I admit we would think with the current talk of small business being the true savior of our economic recession that banks would be more willing to lend. But they are not. In fact, it seems they have tightened up thier lending criteria even more. I understand they are nervous with the mortage crisis but to help us get out of it, lend some instead of letting it sit in the bank.

When I work with a client and we determine the need for capital, I always recommend they start with the local banking system in their community. That sounds like I am talking out of both sides of my mouth but I have a reason for it. I feel this is important to help them start to establish a relationship with their business banking partner. At sometime they will need that partner and at sometime that partner will be willing to lend to them - so get to know each other early in the process.

Clients may not meet the lending criteria due to credit scores, past mistakes, poor or no business plans or do not present well during the bank interview. If after they have shopped the local banks and they have gotten a solid goose egg, then it is time to go to the second tier of lendors I use at my center. But it needs to be said, banks are still lending - they have not stopped totally lending. I am still getting clients funded through bank loans. In fact, this year has been better for me than the last two years. So I really think the secret is the connection you and that potential banker make during the initial interview.

The second tier is made up of organizations like community development corporations, regional planning organziations, economic development organizations and special business groups like downtown redevelopment entities. Here they want to help the local entrepreneur and often do by filling a gap in the financing or taking on the whole deal if they can afford it. So I talk to my clients and give them the listing of area opportunities and they go shopping again. I tell them this may not be as fruitful as my other lower tiers but they often know of opportunities that may exist to help. While I have not had much luck in getting clients funded here, I have found many other resources out there to help with more exact funding opportunities than I ever knew exixted in the area.

If that one goes bust, then we move on down the ladder to tier three - non traditional lendors. Here many people may argue my placement but since I am writing I am deciding the placement. My center is a member of a few national lending networks where I take the client and post their application on the website. Just like in LendingTree, banks from all over the county review the package and then place their offers/questions for us to review and respond. So the client and myself reveiw the offers and make a decision if to take the deal or not. Of course, it is not that simple of a decision or process but we all know that. As for my center, I have posted many deals, gotten bites from out of and in state banks but the clients have all gotten cold feet at the prospect of dealing with a banker they will never meet.

In this tier also is alternative banks who are national in scope but do not act like a traditional bank. They offer programs for specfic industries or categories of the populations (i.e. Veterans, women, etc.). I always make a point to check on them to see if there is any programs my client may qualify for.

The fourth tier is the true non-traditional lendor - funding sources that are willing to take the risk and the client pays the higher price. Nothing wrong here at all, just sometimes the interest rate these companies charge are more like a credit card than a financial source. I am currently working with a client who is in a situation where he has no way to go but to this level - no collateral that is not already spoken for, no capital, in the red but yet is so close to the breakeven point. We have submitted the proposal to the cash flow lender and will see what happens. I make my clients aware of these lendors when we have to since their interest rate is higher and often the client can't receive the full amount they really need to move the needle.

The fifth tier is venture capital/angel firms. Yes even here in Southeast Missouri there are such firms. Now admittingly, this tier may come up sooner depending on the needs of the client. I currently have three clients working with VC firms. I was surprised to learn they often do not operate the way you are told. I prepped my clients for the three minute presentation, helped them create handouts, got the financials ready and even rehearsed. When we went to the meeting, they just wanted to talk to us about the product, the client, why the money and what they hoped to achieve with it. Personally I loved it because it was so relaxed and my clients could handle it. In fact, they went in over prepared with my prep work but yet they answered all the questions dead on.

My final tier is personal capital - credit cards, the 3F plan (friends, family or fools) or P2P opportunities. Now again, this opportunity may come up sooner depending on the situation presented to the client. But I know of several businesses who maxed out one card only to pay it off while maxing out another. Yes high interest but when that is what you have you use it.

I usually get a chuckle at the 3F plan but it is a serious opportunity but one that comes at great risk - the loss of a friendship/relationship. We have all heard of family members not speaking to each other because of a deal gone south. That does not make for a fun Thanksgiving dinner around the family table.

With the P2P (peer to peer), you can go to websites and pitch your idea and people will decide how much they want to give. I have not had any clients go this route yet but a few have looked at it since they were considering a home based business and did not need a large amount. I understand it to be safe and sound for both parties since the money is managed by a third party.

Well just know aspiring entrepreneur, there are many other avenues to the cash you need besides the local bank. Don't give up - just come see me and we will get you started.

Any thoughts or discussion. Where would you place your lending community opportunities in the scale. Let me know and let's talk.